| Abstract |
Although Indonesia has been known to have more than 40% of high enthalpy world geothermal resources and has enacted Law No. 27 Year 2003 on Geothermal Energy, the development of geothermal resources for power generation in Indonesia is still facing many challenges. There has been no green field development since the past 15 years. To-date geothermal resources contribute only 1,050 MW of the total Indonesia power generation capacity of approximately 30,000 MWe. The National Energy Policy has targeted 9,500 MWe of geothermal power supply or 5% of the energy mix by 2025 and the Government of Indonesia is launching the second accelerated 10,000 MW power supply project to be commercially operational by 2012-2018, 48% of which will be geothermal power projects. In Indonesia, the law provides only normative, conceptual stipulations of regulatory perspectives. To make it implementable the law requires subsequence government regulations. For example, to implement the Law No. 27/2003, it requires at least five government regulations, one of which Government Regulation (GR) No. 59 on Geothermal Business Activities which was issued in 2007. The GR 59/2007 requires at least subsequently 14 Ministerial regulations/decrees, three of which have been released to address preliminary survey, assignment of geothermal working areas, and determination of geothermal electricity prices. More Government Regulations (GR) derived from electricity law, tax law, environmental law, forestry law, and regional autonomy law will have to be synchronized to provide certainty of laws and to attract private sector investments in accelerating the geothermal power development. This paper discusses critical issues and barriers to geothermal development that should be well addressed, coordinated and synchronized for the upcoming regulations that may be issued by various ministries. It also exposes the need to have common perception among geothermal stakeholders covering geothermal upstream and downstream development costs which includes the understanding on technical and economic principles as well as social, economical and technical benefits to developers, surrounding communities and Indonesia’s economy. The paper moreover will portray three most crucial issues for geothermal green-field development in Indonesia: transaction for geothermal business license and power purchase agreement, geothermal steam and electricity tariff, and bidding process for geothermal working regions. Another issue to be considered as pre-requisite to the success of geothermal development in Indonesia is the high electricity price generated by geothermal power plants, as compared to other types of power plants, which could hinder development of geothermal energy for electricity generation as electricity tariff in Indonesia is still heavily subsidized. The utilization of geothermal energy over the long-term, however, benefits Indonesia by substituting non-renewable energy sources such as oil, gas and coal, which can be directly exported. In order to steamroll the process of geothermal working region bidding round, permitting, and license; coordination between central and regional governments and among various ministries on land use, environmental impact study, and eligibility to obtain carbon emission reduction credit through Clean Development Mechanism, fiscal and non-fiscal incentives become utmost importance. |